Critical Condition

A Scary Bill, Full of Tricks

Health-care reform will not pass this year, but something that calls itself reform likely will. The dysfunctions in the current system (uncontrollable entitlement spending, rapidly rising insurance costs, miles of innovation-killing red tape) will continue to function as usual because the president and his party have prioritized expanding insurance coverage over fundamental reforms, particularly for the government’s Medicare and Medicaid programs.

It’s fitting that the Democrats have kicked off their final push to enact health-care legislation, full of trickery and disguises, just before Halloween.

First the trickery. The president has committed Congress to a bill that costs less than a trillion dollars, but the real cost will be much higher than that once you parse out the fiscal gimmicks that allow Democrats to gin a good “score” from the Congressional Budget Office — for example, enacting hundreds of billions of dollars in Medicare cuts that will never see the light of day.

Fool me once, shame on you. Fool me twice is business as usual in the Beltway. In 1997 Congress enacted legislation that was supposed to “automatically” adjust Medicare physician fees so that they remained at “sustainable” levels — but Congress has repeatedly voted to undo these “automatic” cuts since 2003. The Senate Finance bill assumes $247 billion in physician payment cuts (including a haircut of more than 20 percent in 2011), along with a slew of other cuts to hospital and nursing-home reimbursement rates. The House bill released earlier this week pared out the “doc fix” that makes up for these cuts, the idea being that if it’s in a different piece of legislation instead, it doesn’t count toward the limit.

The CBO scored the Senate Finance bill as reducing the deficit by a small amount over ten years by pretending that these phantom cuts would actually happen, but threw in a wink and a nudge to show that they knew they were playing an elaborate game of charades:

These projections assume that the proposals are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation. For example, the sustainable growth rate (SGR) mechanism governing Medicare’s payments to physicians has frequently been modified (either through legislation or administrative action) to avoid reductions in those payments.

They also threw in a nearly identical caveat for the House bill:

These longer-term projections assume that the provisions of H.R. 3962 are enacted and remain unchanged throughout the next two decades, which is often not the case for major legislation.

In other words, much of the hundreds of billions in savings that the CBO scores from Medicare reductions and payment rule changes in both bills will likely be lobbied out of existence later. Subtracting these gimmicks puts costs of the bills well north of $1 trillion.

Now for the disguises. The president promised that there will be no new taxes on anyone making less than $250,000 but let Congress craft health-care legislation loaded with new taxes. They’re just not called taxes. Instead we have reams of new regulations, “fees,” and revenue-raising “items” that will increase the cost of insurance even as the low- and middle-income uninsured are required to buy government-mandated insurance plans. New insurance rules (like community rating, guaranteed issue, and the elimination of lifetime limits on spending) along with $130 billion in new fees (in the Senate Finance bill) on insurance companies, drug makers, and diagnostic manufacturers will all drive up the costs of insurance premiums for even basic plans. The non-partisan Joint Committee on Taxation has estimated that nearly 90 percent of these costs will fall on individuals and families making less than $200,000 a year

Want proof? Look at Massachusetts, which has many of the insurance “reforms” that the Democrats have embraced, including a mandate (enacted in 2006) requiring all individuals to buy health insurance or pay a penalty. Today, the Bay State has the highest insurance premiums in the country, and expects double-digit premium increases again next year. If you don’t qualify for a state subsidy to buy insurance, you’re out of luck. As one uninsured, middle-class resident told the Wall Street Journal recently, “I can’t use up all of my savings just to buy mandatory insurance. It’s like penalizing the homeless for refusing to buy a mansion.”

But the Democrats’ scariest Halloween mask will hide the bill’s long-term cost until it’s too late. The most expensive features of the House and Senate bills (including government subsidies for families making up to $88,000 a year to buy health insurance) won’t kick in until 2013, after President Obama has presumably won his second term. The full price tag won’t become apparent until a year or two later.

That’s not an accident. After making millions of Americans dependent on federal subsidies for their insurance coverage, exploding costs will inevitably spur calls for Congress to rein in spending directly through a federal takeover of private health insurance — a single-payer system modeled after Canada’s or the U.K.’s. Just as the administration has used the financial crisis as an excuse to bail out Chrysler and GM as a favor to the UAW, the next “crisis” in health care will give Democrats their long-awaited opportunity to deliver the coup de grace to private insurance markets.

What to do? When it comes to health-care reform, it’s been said that the worst outcome today would be for Congress to do nothing. Actually, the worst outcome is legislation that breaks the budget, slams the middle class with new taxes, and strangles private health insurance — which is what Congress is preparing to do.

Those who are worried about the consequences of these bills must start by unmasking the real consequences of these “reforms” and pointing out that the middle class will bear the brunt of Washington’s bad ideas. And they should remind legislators that this is one vote that will come back to haunt them in 2010.

– Paul Howard is the director of the Center for Medical Progress at the Manhattan Institute and managing editor of